Beyond necessity-driven versus opportunity-driven ...

Beyond necessity-driven versus opportunity-driven entrepreneurship A study of informal entrepreneurs in England, Russia and Ukraine Colin C. Williams

Abstract: To evaluate critically the conventional view that entrepreneurs are either necessity-driven or opportunity-driven, empirical data are reported from England, Ukraine and Russia on the motives of a specific group of entrepreneurs – those operating wholly or partially in the informal economy. The paper finds that, for the vast majority, both necessity and opportunity drivers are involved in their decision to start up enterprises, along with a clear shift from necessity-oriented to opportunity-oriented motivations as their ventures become more established. The paper concludes with a discussion of the public policy implications of these findings. Keywords: necessity entrepreneurs; opportunity entrepreneurs; informal economy; England; Ukraine; Russia Colin C. Williams is Professor of Public Policy in the Centre for Regional Economic and Enterprise Development, School of Management, University of Sheffield, 9 Mappin Street, Sheffield S1 9DT, UK. E-mail: [email protected].

When discussing entrepreneurs’ motives, it has now become commonplace in the entrepreneurship literature to find a distinction being drawn between ‘necessitydriven’ entrepreneurs pushed into entrepreneurship because other options for work are absent or unsatisfactory, and ‘opportunity-driven’ entrepreneurs pulled into entrepreneurship more out of choice (Aidis et al, 2006; Bosma and Harding, 2007; Harding et al, 2006; Maritz, 2004; Minniti et al, 2006; Perunović, 2005; Reynolds et al, 2002; Smallbone and Welter, 2004). In this paper, however, the intention is to evaluate critically the validity of adopting this bifurcated portrayal of entrepreneurs as either necessity- or opportunity-driven. To do this, empirical evidence will be reported from face-toface interviews conducted in England, Ukraine and

Russia with a specific group of entrepreneurs, namely those starting up businesses that operate wholly or partially in the informal economy. First, therefore, this paper will address how the bifurcated depiction of entrepreneurs as either necessity- or opportunity-driven has increasingly pervaded the literature on entrepreneurs’ motives, along with how the literature focusing on informal entrepreneurship has similarly, albeit often implicitly, adopted this dualism when depicting informal entrepreneurs as necessitydriven, pushed into this enterprise as a survival strategy in the absence of alternative options (eg Castells and Portes, 1989; Gallin, 2001; Lagos, 1995; Maldonado, 1995). Demonstrating that although this dualistic typology has begun to be questioned in relation to legitimate entrepre-

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Informal entrepreneurs in England, Russia and Ukraine

neurs but not with regard to informal entrepreneurship, the second section will then report on empirical data collected during face-to-face interviews with 503 entrepreneurs in England, Ukraine and Russia, which evaluate critically the validity of reading the motives of informal entrepreneurs through the lens of this either/or dualism. The final section then draws some conclusions about the appropriateness of using this necessity/opportunity dichotomy to understand entrepreneurs’ motivations. At the outset, however, it is necessary to define what is meant here by entrepreneurship and the informal economy. Entrepreneurship has long proved a problematic and elusive concept to define (Brockhaus and Horowitz, 1986; Cole, 1969; Shaver and Scott, 1991). Indeed, in a now notorious phrase, Hull et al (1980) liken it to ‘hunting the heffalump’. Once one moves beyond the narrow definition of entrepreneurs as people starting up a new business venture (Harding et al, 2006), a heated debate ensues over whether a multiplicity of characteristics, traits and qualities should be used to define entrepreneurship (Baty, 1990; Blanchflower and Meyer, 1991; Bolton and Thompson, 2000; Brockhaus and Horowitz, 1986; Carr, 2002; Chell et al, 1991; Kanter, 1983; McClelland, 1961; Schumpeter, 1996; Storey and Sykes, 1996; Williams, 2006). For this reason, the working definition adopted here is this narrow definition of the entrepreneur as somebody starting up a new business that is less than 42 months old. This definition, although excluding aspects sometimes included, such as intrapreneurship, is fit for the purpose for which it is here intended, namely studying the motives of those starting up business ventures. The informal economy, or what is variously called ‘cash-in-hand work’, ‘off-the-books’ transactions, the ‘shadow economy’ or the ‘underground sector’, is here defined as the paid production and sale of goods and services that are unregistered by, or hidden from, the state for tax and/or benefit purposes, but which are legal in all other respects (European Commission, 1998; Evans et al, 2006; Katungi et al, 2006; Renooy et al, 2004; Small Business Council, 2004; Thomas, 1992; Williams, 2004, 2006; Williams and Windebank, 1998). This widely agreed definition recognizes that the only illicit aspect of informal work is that the transactions are unregistered and/or hidden from the state for tax and/or social security purposes. Where goods and services are themselves illicit (eg in drug trafficking or gun-running), these are excluded from informal work, as are unpaid exchanges.

Necessity- and opportunity-driven entrepreneurship Reviewing the entrepreneurship literature, over the past few decades various conceptual frameworks have been

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developed to explain the factors that drive the decision to start up a business venture (Baty, 1990; Bolton and Thompson, 2000; Burns, 2001; Brockhaus and Horowitz, 1986; Chell et al, 1991; Cooper, 1981; Kanter, 1983). Recently, however, one particular classificatory schema has become increasingly pervasive. Despite it being earlier argued that the complex motives of entrepreneurs should not be oversimplified (Rouse and Dallenbach, 1999), a stream of thought has followed Bögenhold (1987), who distinguished between entrepreneurs driven by economic need and those motivated by a desire for self-realization. Adopting this simplistic bifurcated depiction, many contemporary commentators have differentiated between entrepreneurs according to whether they are necessity-driven, pushed into entrepreneurship because all other options for work are absent or unsatisfactory, or opportunity-driven, pulled into this endeavour more out of choice to exploit some business opportunity (Aidis et al, 2006; Bosma and Harding, 2007; Harding et al, 2006; Maritz, 2004; Minniti et al, 2006; Perunović, 2005; Smallbone and Welter, 2004). Indeed, this bifurcated classification has begun to move ever more centre stage in the contemporary entrepreneurship literature, reflected not only in its usage in the Global Entrepreneurship Monitor (GEM), the predominant global survey of the degree and nature of entrepreneurship (Bosma and Harding, 2007; Harding et al, 2006; Minniti et al, 2006), but also in the emerging literature that is seeking to unravel what is meant by an entrepreneurial opportunity (Casson and Wadeson, 2007; Companys and McMullen, 2007; McMullen et al, 2007; Plummer et al, 2007). For a long time, this bifurcated depiction has also been at the heart, albeit often implicitly, of the literature that explains the motives of informal entrepreneurs. Today, it is widely recognized that many individuals engaged in the informal economy are pursuing entrepreneurial ventures (Browne, 2004; Cross, 2000; De Soto, 1989, 2001; Evans et al, 2006; Franks, 1994; ILO, 2002; Rakowski, 1994; Small Business Council, 2004; Williams, 2005a and b, 2006). As the International Labour Organization (ILO, 2002, p 54) for example states, the informal economy acts as ‘an incubator for business potential and … transitional base for accessibility and graduation to the formal economy’ and many informal workers show ‘real business acumen, creativity, dynamism and innovation’. Until now, however, few studies have sought to evaluate their motives empirically. Instead, as Travers (2002, p 2) puts it, ‘most research on the informal economy gives short shrift to the motivations of people to do this work. It is usually said that people do the work to earn extra money and left at that.’ The result is that informal entrepreneurs have generally been portrayed as being driven out of

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necessity into this realm by their inability to find formal employment, and participation in such work is viewed as a survival strategy and a last resort (Castells and Portes, 1989; Gallin, 2001; Portes and Walton, 1981; Raijman, 2001; Sassen, 1997). This depiction, nevertheless, has been an a priori assumption rather than a finding of empirical studies. A range of studies of those starting up business ventures wholly or partially in the informal economy, however, have questioned whether they are always necessity-driven. Indeed, some argue the inverse, depicting them as opportunity- rather than necessitydriven. As Gerxhani (2004, p 274) asserts, those starting up businesses on a wholly or partly off-the-books basis ‘choose to participate in the informal economy because they find more autonomy, flexibility and freedom in this sector than in the formal one’. Snyder (2004), in her study of 50 informal entrepreneurs in New York City’s East Village neighbourhood, similarly concludes that although previous literature has assumed that external pressures (such as discrimination, economic restructuring and unemployment) force people to work off-the-books, the informal entrepreneurs she studied were all doing so out of choice. They engaged in such endeavours to set their careers on a new path, either in order to transform their work identity or to reveal their true selves. This is also the finding of Cross (1997, 2000). Studying street vendors, he argues that many are doing this work out of choice. The conventional depiction of informal entrepreneurs as universally necessity-driven is therefore in a growing number of studies being replaced by a view of them as universally driven by opportunity and doing so out of choice. Few studies until now, however, have gone beyond portraying informal entrepreneurs as either universally necessity-driven or universally opportunity-driven. The study by Lozano (1989) of 50 dealers at flea markets in northern California is one notable exception. She found that 80% were involuntary entrants pushed into this endeavour due to few other opportunities being open to them, and that the remaining 20% were voluntary entrants who had chosen this endeavour. Akin to the wider literature on legitimate entrepreneurs, therefore, she seeks not to depict informal entrepreneurs as universally either opportunity- or necessity-driven, but to understand the ratio of opportunity v necessity entrepreneurship (eg Harding, 2003; Harding et al, 2006; Maritz, 2004; Minniti et al, 2006; Perunović, 2005). Necessity- and opportunity-driven entrepreneurs, however, are still being treated as entirely separate categories constituted via their negation of each other (ie to be an entrepreneur out of choice means that one is not doing so out of necessity). As Minniti et al (2006, p 21) assert in relation to the GEM survey, ‘In most countries


… nearly all individuals can be sorted into one of the two categories’. Recently, however, several studies of legitimate entrepreneurs have questioned the separateness of opportunity and necessity drivers and argued that they co-exist in entrepreneurs’ motives (Aidis et al, 2006; Smallbone and Welter, 2004). For example, studying Ukraine, Belarus and Moldova, Smallbone and Welter (2004) invited business owners to provide up to three reasons for starting their businesses. They find that although most entrepreneurs are opportunity-driven, it is rather overly simplistic to adopt an either/or approach because in early-stage transition economies, well educated people can be presented with limited opportunities for satisfying and sufficiently rewarding employment, meaning that both opportunity and necessity co-exist among reasons for starting up business ventures. Similarly in 2002 in Ukraine, Aidis et al (2006) surveyed 297 women and 81 men in four cities about why they had started their own businesses. Asked to give three reasons, they identified the co-existence of both opportunity (eg the desire for independence, to have one’s own business) and necessity in individual entrepreneurs’ motives, as well as evidence that their motives change over time. Until now, however, there has been little consideration of the co-presence of necessity and opportunity drivers amongst informal entrepreneurs. Nor, with the exception of Snyder (2004) who notes that some informal entrepreneurs’ motives shift over time, has there been any consideration of whether there is fluidity in motives, and if so, the direction in which their motives move. Here, in consequence, a survey is reported of informal entrepreneurs in three countries that evaluates critically the validity of not only the necessity/opportunity dualism in relation to informal entrepreneurship, but also the dynamics of informal entrepreneurs’ motives.

Evaluating informal entrepreneurs’ motives in England, Ukraine and Russia To determine whether informal entrepreneurs can be depicted as necessity- or opportunity-driven, case study evidence is here reported from face-to-face interviews with informal entrepreneurs in three countries, namely England (conducted between 1998 and 2002), Ukraine and Russia (both conducted in late 2005 and early 2006). Grounded in previous studies, which reveal that the extent and character of informal economic practices vary markedly across both affluent and deprived populations, as well as urban and rural areas (Fortin et al, 1996; Jensen et al, 1995; Renooy, 1990; Williams, 2004, 2005a and b; Williams and Windebank, 1998), a maximum variation sampling method was employed to

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Informal entrepreneurs in England, Russia and Ukraine Table 1. Localities studied in England, Ukraine and Russia. Country

Area type

Locality

England

Affluent rural

Fulbourn, Cambridgeshire Chalford, Gloucestershire Grimethorpe, South Yorkshire Wigton, Cumbria St Blazey, Cornwall Fulwood, Sheffield Basset/Chilworth, Southampton Manor, Sheffield Pitsmoor, Sheffield St Mary’s, Southampton Hightown, Southampton Krylatskoe, west Moscow South-east okrug, Moscow Leshkovo, outer Moscow Perchersk, Kiev Vynogardar, Kiev Vasilikiv Uzghorod

Affluent rural Deprived rural Deprived rural Deprived rural Affluent suburb Affluent suburb Deprived urban Deprived urban Deprived urban Deprived urban Russia

Affluent urban Deprived urban Mixed

Ukraine

Affluent urban Deprived urban Deprived rural Mixed urban

No of interviews 70 70 70 70 70 50 61 100 100 100 100 100 100 113 150 150 150 150

select a range of localities for study in each country (see Table 1). Although the outcome is that this is not a nationally representative sample, it does avoid the common pitfall in many previous small-scale studies of studying only one particular locality in each country and consequently being unable to decipher whether the findings are unique to this locality type (Leonard, 1994). Having selected diverse locality types for investigation in each country, a spatially stratified sampling technique (Kitchen and Tate, 2001) was then used to select households for interview in each locality. If there were some 1,000 households in the locality and 100 interviews were sought, that is, the researcher called at every 10th household. If there was no response and/or an interview was refused, then the 11th household was visited, then the 9th, 12th, 8th and so on. This provided a spatially stratified sample of each locality. In total, some 811 household interviews were conducted in deprived and affluent urban and rural districts in England between 1998 and 2002, 600 in Ukraine during late 2005 and early 2006 and 313 in Russia again in late 2005 and early 2006 (resulting in 1,724 interviews). In order to gather data on informal entrepreneurs’ motives, a relatively structured face-to-face interview schedule was employed. First, background information was gathered from households on the age, gender, employment status and work history of household members as well as the gross household income,

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including whether any household member had started up a business venture in the past 42 months. Second, and adopting a gradual approach to addressing this sensitive topic of participation in informal work, questions were asked about the type of labour the household last used to complete a range of common domestic tasks, followed by questions on whether they had conducted any of these tasks for other households, and if so, whether or not they had been paid, and whether they had been paid ‘cash-in-hand’. Third and only following these ‘warmup’ questions, was the issue of whether the entrepreneurs who had started up some business venture in the past 42 months participated in the informal economy, and why they had decided to start up their enterprise. To do this, a range of open-ended questions was asked about the nature of their business venture, whether their transactions had been wholly or partly conducted on an off-the-books basis, why they had originally decided to start up their enterprise and whether their motives had changed over time. The results are reported below. The prevalence and character of informal entrepreneurs Across the three countries, as Table 2 reveals, 503 individuals were identified who had started a business venture during the past 42 months: 91 entrepreneurs in England, 331 in Ukraine and 81 in the Russian city of Moscow. Of these, some 77%, 90% and 100% respectively reported during the face-to-face interviews that some or all of their business transactions were conducted in the informal economy. Although this is obviously a very small sample of all entrepreneurs in these countries and, as stated above, not nationally representative, this finding that such a high proportion of entrepreneurs was engaged in the informal economy will require further research in future studies. Until now, there has perhaps been a perception that most entrepreneurs play entirely by the rulebook, but this study tentatively reveals that this might not always be the case. A large proportion of entrepreneurs appear to conduct some or all of their transactions in the informal economy in all of these countries. Indeed, breaking down these data according to whether entrepreneurs operate wholly in the informal Table 2. Do entrepreneurs engage in the informal economy? England Russia Ukraine No Engaged in informal economy (%) Wholly legitimate (%) Registered but conducting share of trade off-the-books (%) Not a registered business/ no licence to trade (%)

91 77 23

81 100 0

331 90 10

57

4

39

20

96

51



economy or conduct only a portion of their transactions in this realm, the finding is that although in England most have registered their enterprises with the tax authorities and conduct only a portion of their trade in the informal economy, this is not the case in Ukraine or Russia. Whilst only one in five of the English entrepreneurs surveyed operated on a wholly informal basis, in Ukraine, over half (51%) of the entrepreneurs surveyed had not registered their business or sought a licence to trade and were operating totally in the informal economy, whilst amongst those surveyed in the Russian city of Moscow, this figure was 96%, intimating that the vast bulk of entrepreneurs are not even on the radar screen of the state. Across all three countries, therefore, the finding of this survey is that only a small proportion of the entrepreneurs surveyed claim to operate fully legitimate enterprises. The vast majority are engaged in the informal economy in all three countries. Who, therefore, are these informal entrepreneurs? Conventionally, as stated earlier, the perception has been that informal entrepreneurs are marginalized groups who cannot gain access to the formal labour market and are engaged in informal enterprise out of economic necessity as a last resort. This study, however, reveals that in all three countries, these entrepreneurs are polarized at the two ends of the income spectrum; they are concentrated in both the poorest and most affluent households in terms of gross household income. In the lowest quartile of households surveyed in terms of gross household income, one finds clustered 34% of informal entrepreneurs in England, 35% in Ukraine and 30% in Russia, whilst in the highest quartile of households surveyed in terms of gross household income, one finds 40% of all informal entrepreneurs surveyed in England,

41% in Ukraine and 56% in Russia. Furthermore, the entrepreneurs surveyed who report that they run registered enterprises but conduct a portion of their trade off-the-books are concentrated in the highest-income quartile of households, whilst those surveyed working on a wholly informal basis are more heavily concentrated in the lowest-income households. Table 3 presents the distribution of informal entrepreneurs by gross household income. This, however, is not the only difference in the character of the informal entrepreneurs in the highestand lowest-income households. Those in the highest quartile in terms of gross household income were also generally found to be in formal employment or registered self-employed (95% of the informal entrepreneurs surveyed in England, 98% in Ukraine and 92% in Russia) and to use their formal occupation to engage in relatively well paid informal self-employment related to their formal job. One example is a husband and wife in Moscow, both schoolteachers, who supplement their income from their formal jobs by providing additional lessons on an informal self-employed basis. Between them, they have four groups of 10 children who each pay 200 roubles for a 1 hour 30 minute lesson. Each gives three informal lessons per week, so they earn 24,000 roubles per week in additional income to complement their 12,000 roubles in formal earnings. Those in the lowest quartile in terms of gross household income, in stark contrast, often do not have a formal occupation that they can use to foster their informal enterprise. Instead, entrepreneurs in this quartile generally engage in lower-paid forms of informal entrepreneurial endeavour. Indeed, the vast majority of these respondents asserted that they would prefer a ‘normal’ formal job so as to minimize their risks of

Table 3. Distribution of informal entrepreneurs by gross household income (%).

Lowest quartile

Household by gross income Lower quartile Upper quartile

Highest quartile

Percentage of sample

25

25

25

25

England Percentage of all entrepreneurs (n = 91) Percentage of informal entrepreneurs (n = 70) Percentage of wholly illegitimate (n = 18) Percentage doing portion off-the-books (n = 52)

29 34 61 29

5 7 11 6

22 19 6 23

44 40 22 46

Russia Percentage of all entrepreneurs (n = 81) Percentage of informal entrepreneurs (n = 81) Percentage of wholly illegitimate (n = 78) Percentage doing portion off-the-books (n = 3)

30 30 33 0

11 11 11 0

3 3 3 0

56 56 53 100

Ukraine Percentage of all entrepreneurs (n = 331) Percentage of informal entrepreneurs (n = 298) Percentage of wholly illegitimate (n = 169) Percentage doing portion off-the-books (n = 129)

34 35 46 21

13 14 14 14

10 10 8 12

43 41 32 53


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Informal entrepreneurs in England, Russia and Ukraine Table 4. Why did you decide to start up your enterprise? Motive To generate sufficient income to live/survive (%) To generate additional income (%) Desire to have own business (%) To fill a gap in the market (%) Independence (%) Other (%) Total (%)

England

Russia Ukraine

23

45

55

3 26 24 21 3 100

25 6 15 7 2 100

34 4 2 3 2 100

being cheated or robbed and to be able to take paid leave, but did not have the opportunity to do so. Instead, they had to rely on piecemeal informal entrepreneurial endeavour as a means of livelihood. Examples from Moscow include a pensioner who supplements her state pension of 2,200 roubles per month by selling cigarettes at a train station, and an illegal street vendor who sells flowers, which she grows on her dacha, just outside a market. Informal entrepreneurs: necessity- and/or opportunitydriven? Given these characteristics of informal entrepreneurs, is it the case therefore that they are necessity-driven? Or is it more the case that opportunity drivers prevail? To answer these questions, those who had started up business ventures were first asked in an open-ended manner, ‘why did you decide to start up this enterprise?’ As Table 4 reveals, the finding is that in Russia and Ukraine, some 70% and 89% respectively stated that it was in order to generate sufficient income to survive or to generate additional income, whilst in England some 71% cited motives normally associated with ‘opportunity entrepreneurship’ such as the desire to have one’s own business, to fill a gap in the market or to have greater independence. If this study of the motives of informal entrepreneurs were to end its analysis here, then it would be one of the first studies to reveal that informal entrepreneurs are not either universally necessity-driven (Castells and Portes, 1989; Gallin, 2001; Portes and Walton, 1981; Raijman, 2001; Sassen, 1997) or universally opportunity-driven (Gerxhani, 2004; Snyder, 2004). Instead, it demonstrates that there are both necessity- and opportunity-driven informal entrepreneurs in each country, and that in the Eastern and Central European countries informal entrepreneurship is more necessity-driven, while being more opportunity-driven in the Western European nation. To drill down further into their motives, however, two further probes followed this initial question. These first repeated the answer given by the respondent with an inflexion (eg ‘to earn sufficient money?’ or ‘to generate additional income?’) and second, asked in an open-

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Table 5. Motivations cited by entrepreneurs following additional probes. Motive Solely necessity (%) Mostly necessity but also opportunity (%) Mostly opportunity but also necessity (%) Solely opportunity (%)

England

Russia Ukraine

6 14

12 60

13 56

70

23

24

10

5

7

ended manner, ‘any other reasons?’ Analysing the responses, it becomes apparent that delineating entrepreneurs in all of these countries as either necessity- or opportunity-driven is an oversimplification. As Table 5 reveals, when the fuller range of motives was analysed in response to these additional probes, very few entrepreneurs cited solely economic necessity. The majority cited a mixture of both necessity and opportunity motivations: 83% in Russia, 80% in Ukraine and 84% in England. Of these, the majority in Russia and Ukraine emphasized mainly economic necessity, but also some opportunity motives, eg that they had identified ‘a need they could fill’, whilst in England the majority identified mainly opportunity motivations, but also some economic necessity underpinning their decision to start up a business venture. Just 5, 7 and 10% in Russia, Ukraine and England respectively cited purely opportunity drivers. Compared with previous studies of informal entrepreneurs, therefore, this study reveals that those setting up business ventures are not either universally necessitydriven or universally opportunity-driven. Instead, necessity and opportunity drivers are co-present in the rationales of the vast majority of informal entrepreneurs surveyed. To take just one example to see how opportunity and necessity combine, a computer worker employed by a software company was interviewed who often offered to do small jobs more cheaply for the company’s clients if they paid him independently on an off-the-books basis. For him, this was mostly necessitydriven because he deemed his wages too low to support his family sufficiently, but also in part opportunitydriven since he had ready access to clients unwilling to pay the formal fees charged by the company, and he saw himself as filling a gap in the market. Importantly, these entrepreneurs’ motives did not always remain fixed over time. In response to a question about whether, and if so how, their reasons for engaging in such entrepreneurial endeavour had changed, a clear pattern can be discerned. As Table 6 reveals, there is a transition from necessity- to opportunity-oriented motives as their businesses mature. Of those who stated that their motivations had changed, a clear majority asserted that the shift had been away from necessityoriented motives and towards opportunity-oriented


Informal entrepreneurs in England, Russia and Ukraine Table 6. Do informal entrepreneurs’ motives change over time? England Motives unchanged (%) From necessity-oriented to opportunity-oriented (%) From opportunity-oriented to necessity-oriented (%)

Russia Ukraine

74 10

40 49

42 51

6

11

7

motivations: 82% in Russia and 88% in Ukraine. In England, meanwhile, where a smaller proportion of informal entrepreneurs had started out as necessitydriven, this figure was 62%. Put another way, some two-thirds of those who started out as necessity-driven entrepreneurs in these countries had become more opportunity-driven over time. This has important implications. For those asserting that opportunity-driven entrepreneurs are more likely to make a positive contribution to economic development and growth than necessity-driven entrepreneurs (eg Harding et al, 2006; Minniti et al, 2006; Reynolds et al, 2002), it suggests that necessity-driven informal entrepreneurship may well provide a seedbed or platform from which opportunity-driven entrepreneurs emerge.

precisely the entrepreneurship and enterprise that with the other hand, through their enterprise culture policies, they are seeking to nurture, especially given that some two-thirds who start out as necessity-orientated turn into opportunity-orientated entrepreneurs. Recognizing the integrative and dynamic nature of entrepreneurs’ motives is thus more than simply a matter of academic interest. A fuller and more nuanced understanding of informal entrepreneurs’ motives is crucial so that appropriate public policy decisions can be taken towards this hidden enterprise culture, such as initiatives to enable these entrepreneurs to legitimize their business ventures rather than solely measures to eradicate the enterprises. If this paper therefore stimulates further studies that evaluate whether there is the same copresence of necessity and opportunity factors and dynamism in entrepreneurs’ motives elsewhere, as well as greater reflection on what should be done about the prevalence of informal entrepreneurs, then the paper will have fulfilled its objectives.

References

In much of the recent literature on entrepreneurs’ motives, there has been a tendency to differentiate between necessity- and opportunity-driven entrepreneurs (Harding et al, 2006; Maritz, 2004; Minniti et al, 2006; Perunović, 2005). This paper has critically evaluated this bifurcated distinction in relation to informal entrepreneurs and has revealed that squeezing entrepreneurs into one side or the other of this either/or dichotomy oversimplifies entrepreneurs’ motives and obfuscates how they change over time. This necessity/ opportunity dualism is not only too simplistic to explain entrepreneurs’ motives, since both necessity and opportunity factors are commonly involved, but there is often a temporal fluidity in their motives, usually from necessity-oriented to opportunity-oriented factors. The lived practice is therefore more integrative and dynamic than is captured by this static either/or dualism. This has important policy implications, especially so far as tackling informal enterprise is concerned. Until now, there has been an assumption that informal entrepreneurs are largely necessity-driven and that a deterrence approach can therefore be adopted that seeks to eradicate them from the economic landscape by increasing the level of punishments and chances of detection (European Commission, 1998; Renooy et al, 2004). This paper reveals, however, that if governments adopt this approach, they will with one hand deter

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Conclusions

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